Buy-to-let tax guide

General guidance, not a personal recommendation. Lender criteria, insurance terms and costs depend on the product and your circumstances. Numerical examples are illustrations unless expressly identified as an individual quote. Check current terms with your adviser and tax or legal points with the relevant specialist.

Buy-to-let looks simple on the surface: rent minus costs equals profit, pay tax on the profit. Since 2017 that story has become much more complicated. Mortgage interest relief has been restricted, stamp duty has an additional 5% surcharge, CGT changes landed and limited company buy-to-let has become mainstream for higher-rate taxpayers.

This guide covers the main tax hits: income tax on rental profit, Section 24 mortgage interest treatment, stamp duty surcharge, capital gains tax on sale, and the trade-offs between personal vs limited company ownership. We're not accountants, anything material needs sign-off from your accountant, but we know enough to flag the traps.

Five hits to plan for

Income tax on rental profit

Rental profit is added to your other income and taxed at your marginal rate (20/40/45%). Deductible costs: agent fees, repairs, ground rent, insurance, replacement furniture, accountancy. Not deductible as a cost post-2020: mortgage interest (now restricted, see Section 24).

Section 24, mortgage interest restriction

Pre-2017 landlords deducted mortgage interest from rental income. Since 2020, interest gets a 20% tax credit instead. Higher-rate taxpayers pay significantly more tax than under the old rules. See our dedicated Section 24 guide.

Stamp Duty Land Tax surcharge

In England and Northern Ireland, higher SDLT rates usually add five percentage points where an additional-property purchase is within those rules. At a £300,000 purchase price, standard residential SDLT is £5,000; if the higher rates apply it is £20,000. A qualifying first-time buyer buying a £300,000 main home pays £0. Scotland uses LBTT and Wales uses LTT, with different rules. Check the purchaser, transaction and any relief before budgeting.

Capital Gains Tax on sale

Sell a buy-to-let for profit and you owe CGT on the gain (sale price minus purchase price minus costs). CGT on residential property is 18% (basic rate) / 24% (higher rate) after your £3k annual exemption. Must be reported and paid within 60 days of completion.

Limited company buy-to-let

A company pays Corporation Tax on taxable profits. The main rate is 25%; eligible small-profit companies may pay 19%, with marginal relief between the relevant thresholds. Associated companies, accounting-period length and exclusions can affect the calculation. Company finance costs are subject to the company tax rules, rather than the individual residential-landlord restriction. Taking money out can create further tax. Buying or transferring property through a company can also trigger SDLT, CGT and other costs. Compare the full position with an accountant before choosing a structure.

Making Tax Digital

Making Tax Digital for Income Tax applies in stages to qualifying gross income from self-employment and property combined, before expenses, using the relevant earlier tax return. Income over £50,000 in 2024/25 brings a start date of 6 April 2026; over £30,000 in 2025/26 brings 6 April 2027; over £20,000 in 2026/27 brings 6 April 2028. Exemptions can apply. It requires compatible software and quarterly updates, as well as an annual tax return. Ask your accountant to confirm your start date and obligations.

Personal vs limited company, the headline trade-off

This is the single biggest tax decision for new buy-to-let investors in 2026. Simplified view:

Personal and company ownership can produce different tax, borrowing and administration costs. Neither structure is automatically cheaper for a higher-rate or basic-rate taxpayer. Model income, borrowing, expenses, future sales, profit withdrawals and transfer taxes with an accountant before deciding.